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Four Arrested in Insider Trading Probe

Story updated with additional information and a comment from SAC Capital.

NEW YORK ( TheStreet) -- The U.S. Attorney for the Southern District and the Federal Bureau of Investigation announced insider trading charges on three hedge fund portfolio managers and one analyst on Tuesday, the latest developments in a wide-ranging probe that began with the arrest of Galleon chief Raj Rajaratnam in October 2009.

Those charged in the scheme are Samir Barai, the founder of Barai Capital Management LP, Jason Pflaum, a former research analyst for Barai, Donald Longueuil and Noah Freeman, former junior portfolio managers at SAC Capital Advisors LP. The insider trading charges represent the defendents activities at six hedge funds, including Primary Global Research.

Pflaum and Freeman - who pleded guilty to two securities fraud charges and are cooperating with authorities -- could face up to 25 years in prison.

"Representing six hedge funds, the four defendants allegedly obtained and shared material, non-public information ("Inside Information") about at least six publicly-traded companies for the purpose of executing securities transactions that realized millions of dollars in illegal profits," a press release from the U.S. attorney's office stated.

"They got specific, on the nose, information about companies before it was made public," said Preet Bharara, United States Attorney for the Southern District of New York at a press conference this afternoon. "In a sort of triangle of trust, the four portfolio managers shared their sources and worked with each other and pooled their illegal inside information."

Barai and Longueuil have also been charged with obstruction of justice "for their efforts to destroy evidence of their involvement in insider trading after reading media reports," about the investigation, the release states.

According to the charges, Longueuil allegedly used pliers to rip apart a flash drive into four pieces, disposing them into four different baggies. The bags were then dumped into garbage trucks in a 20 block radius of New York City, all the while Longueuil was being videotaped by the FBI.

Barai allegedly asked Pflaum to erase digital information on his laptop the evening of November 19, but he documented his actions through text messages on his Blackberry that were later obtained by authorities.

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